Fixed, Variable or Split? Picking the Right Loan Structure

Choosing between a fixed and variable interest rate is one of the first decisions you’ll make when applying for a home loan. Moneysmart provides a good overview of the pros and cons moneysmart.gov.au.

Fixed rate loans

• Predictable repayments:  The interest rate stays the same for a set period (often 1–5 years), making budgeting easier.

• Limited flexibility:  You may pay break fees if you refinance or repay the loan early. Extra repayments are often capped.

• No benefit if rates fall:  If market rates drop, you continue paying the higher fixed rate.

  
  

Variable rate loans

• Rate can go up or down:  Your repayment changes with the lender’s variable rate. This provides less certainty but potential savings if rates fall.

• More features:  Variable loans usually offer features like offset accounts and redraw facilities, making it easier to make extra repayments or use savings to reduce interest.

• Easier to switch:  You can refinance without break fees.

  
  

Split loans

A split (or partially‑fixed) loan allows you to divide your mortgage into a fixed portion and a variable portion. This gives you a measure of rate certainty while still allowing some flexibility and features. You decide the split (e.g. 50/50 or 60/40) based on your risk tolerance.

Tip:  Discuss your budget, risk appetite and likely future plans with your broker. They can model different scenarios to show how fixed vs variable rates could affect your repayments.